Severance pay: How much are you entitled to?

November 5, 2008

In previous columns, we’ve covered when a fired employee might be entitled to get reinstated and the circumstances under which an employer can fire an employee and not have to give any notice or severance pay.

Now we’re going to cover the notice and severance pay an employee can look forward to receiving, if he’s entitled to any. Bear with me; it can get complicated.

If you have a written employment contract which sets out the notice or pay you are entitled to get upon termination then your contract will apply unless the contract is invalid or the notice or severance clause does not meet the minimum standards set forth below. An employment contract can be invalid for any number of reasons, but we are getting into some complexities that require an expert’s advice.

If you are a member of a union and there is a collective bargaining agreement then the CBA should contain the details of the notice and severance pay. Get a copy of it and read it. You might be able to get a bit more money if you have a plausible case for reinstatement.

If you are employed by a federally regulated business such as a bank, broadcasting company (TV or radio), cable provider, telephone company or federal insurance company and you aren’t a member of a union then your minimum rights come from the Canada Labour Code. Provided you’ve worked for three consecutive months you’ll get at least two weeks of notice or two weeks pay in lieu. In addition, if you’ve worked for 12 consecutive months you’ll also be entitled to a severance payment of a minimum of five days of wages or two days of wages for each completed year of employment.

If you are employed by any other business in Ontario then your minimum rights come from the Employment Standards Act (ESA). This legislation requires one week of notice or pay in lieu if you’ve worked for less than 12 but more than three months. It’s two weeks if you’ve been employed at least one year but less than three. This goes up one week per year, so that you’re entitled to eight weeks of notice or pay in lieu if you’ve worked eight years or more. Unfortunately, the ESA caps the notice or pay in lieu at eight weeks, meaning that you get the same eight weeks if you’ve worked eight years or 18 years.

In addition, if you’ve been employed for five years or more by an employer with an annual payroll of at least $2.5 million then you are also entitled to a severance payment of one week per year up to 26 weeks.

There are some exceptions to this. You may get a bit more if you are part of a large lay-off, but some workers may get less or nothing if they are in certain industries like the construction industry. Space constraints don’t allow me to get into more detail.

If you have any questions or if you feel your employer hasn’t given you your due then you can contact either the federal Ministry of Labour for federally regulated employees, or the provincial Ministry of Labour for provincially regulated employees, or a lawyer. Each ministry has a website and live people to answer your questions. Unionized employees can consult with their union. Please don’t send your question to me!

The most important thing to note about all of this is that the notice and severance pay requirements in the Canada Labour Code and the Employment Standards Act are minimums. You may be entitled to more, but to get more you need to know about Common Law. I’ll explain this in my next column in two weeks.